Loson v Stack & Anor

The Court of Appeal dismissed the appellant's challenge to a District Judge's instalment order under CPR 40.9A, upholding the view that when varying a County Court costs order the court must balance the interests of the judgment debtor against the judgment creditors' right to vindication. The court held that the District Judge had applied the wrong test by focusing only on what the debtor could afford, and had failed to take proper account of statutory interest and the practical effect on enforcement (including an existing bankruptcy petition). The judge must be satisfied that an extended repayment schedule is realistic and will result in payment of principal and interest within a reasonable time.

Background and procedural posture:

• The dispute arose after bailiffs (Newlyn plc) seized and removed the appellant's car in November 2011 following non-payment of a parking fine by her husband. The County Court trial in September 2013 dismissed the appellant's claim for an injunction and damages and ordered her to pay the defendants' costs, with an interim payment requirement.
• The appellant applied under CPR 40.9A on 30 September 2015 to vary two County Court costs orders so she could pay by instalments of £50 per month. The defendants objected and presented a bankruptcy petition in December 2015. A District Judge (Wright) made an instalment order of £50 per month. The defendants successfully appealed that order to HH Judge Luba QC, who set it aside and dismissed the appellant's application. The appellant appealed to the Court of Appeal.

Nature of the application: The appellant sought a variation under CPR 40.9A to permit payment of two costs orders by instalments of £50 per month.

Issues framed:

• Whether the District Judge applied the correct legal test and exercised discretion properly when making an instalment order under CPR 40.9A.
• What effect an instalment order has on an existing bankruptcy petition and whether the court must take that into account.
• Whether the proposed instalment plan was realistic and proportionate, taking into account statutory interest and likelihood of repayment within a reasonable period.

Court’s reasoning and decision:

• The Court held that CPR 40.9A gives a broad discretion but that discretion must respect the rights of judgment creditors; an instalment order should be supported by a realistic repayment schedule and evidence that the creditor can expect to receive principal and interest within a reasonable period.
• The District Judge erred by concentrating solely on the debtor’s affordability and by assuming an instalment order would not affect the pending bankruptcy petition. The instalment proposed would not keep pace with statutory interest and thus would not realistically discharge the principal within a reasonable period.
• The Court endorsed the approach in earlier authorities (Amsalem; Gulf International Bank) that extensions of time to pay are exceptional and must consider the creditor's interest in enforcement where insolvency remedies are available.
• Given the appellant’s financial position and absence of evidence of likely improvement, the Court concluded no useful purpose would be served by remitting the matter and dismissed the appeal.

The appeal was dismissed. The Court held that the District Judge had applied the wrong test under CPR 40.9A by focusing solely on what the debtor could afford and failing to balance properly the interests of the judgment creditors, including the practical effect of interest and a pending bankruptcy petition. An instalment order must be supported by a realistic repayment schedule showing likely repayment of principal and interest within a reasonable period.

Appeal from a decision of HH Judge Luba QC in the County Court at Central London (decision dated 8 July 2016 referenced in the judgment). The matter originated in the Central London County Court (District Judge Jackson trial 24 September 2013) and proceeded through various interlocutory applications before the impugned decisions leading to this appeal. Neutral citation for this Court of Appeal judgment: [2018] EWCA Civ 803.